GDP acceleration will make India the fastest growing trillion dollar-plus econ-omy and will bring investment opportunities in education, healthcare, housing finance and real estate, a study by Tata Securities, a subsidiary of Tata Capital, has said.
But the cycle of interest rate cut by RBI may see a reversal next year as the apex bank may have to pause after US raises rates next year and the central bank may even have to raise rates by September next year.
As per the International Monetary Fund forecast, India’s real GDP growth is pegged at 7.5 percent for 2015-20.
Mr. Anand Shanbhag, head of research, Tata Securities, said, “By 2018, India’s GDP may exceed $3 trillion. There is no other trillion dollars-plus economy that is going to grow faster and India will grow 1.5 to 2 percent higher than China in next five years. India is going to contribute additional 6 percent to global GDP growth.”
In 2014 as per IMF data, India’s GDP was $2,050 billion or 2 trillion compared with China’s $10 plus trillion and the USA’s $17-18 trillion economy. “India will have third highest incremental GDP in 2014-2019 of $1,262 billion, which will be next only to China and the US,” Mr. Shanbhag said.
As per the Tata Securities study, “long-term investors in the India story have been actually rewarded with huge returns across cycles. Every $1,000 per month invested for 10 years starting January 2005 and ending December 2014 in the Sensex, has given a far superior return at 8.6 percent against 8 percent by Dow Jones Industrial Averages representative of US economy, 4.1 percent by Hong Kong’s Hang Seng index, a Chinese proxy, 3.7 percent by Japan’s Nikkei index and 2 percent by FTSE, a proxy for European economy.”
India’s industrial growth is recovering and it’s no more true that we are lan-guishing. Capital goods and consumer goods and the manufacturing sector as a whole is showing initial signs of recovery. Corporate growth will start show-ing from second half of the financial year i.e., November-December, but it will be reflected clearly from the fourth quarter, which would have much better growth, Mr. Shanbhag said.
Some key opportunities in the next trillion dollar GDP growth from the consumption point of view would be in housing, home durables, travel, leisure and enter-tainment.
From the infrastructure and capital expansion point of view, investment opportunities lies in mass trans-port, low cost healthcare, education and vocational training.
In the financial sector, investment opportunities lies in remittances and mobile payments as mobile pay-ment banks take off, which will impact current and saving account cash balances of banks as well as in credit scoring and risk assessment for retail loans.
There are some challenges ahead for the next trillion-dollar GDP growth. Like the interest rate, which may be cut for the next two quarters in 2015 and could go up in 2016. In addition, in the next five quarters, the Libor rate will rise quite sharply as the US Federal Reserve raises interest rates, Mr. Shanbhag said.
Another challenge will be the shrinking of govern-ment’s total expenditure as government withdraws interest and subsidies, which can be a challenge to economic activity, Mr. Shanbhag said.
(Source – Financial Chronicle, 23-July-2015)
But the cycle of interest rate cut by RBI may see a reversal next year as the apex bank may have to pause after US raises rates next year and the central bank may even have to raise rates by September next year.
As per the International Monetary Fund forecast, India’s real GDP growth is pegged at 7.5 percent for 2015-20.
Mr. Anand Shanbhag, head of research, Tata Securities, said, “By 2018, India’s GDP may exceed $3 trillion. There is no other trillion dollars-plus economy that is going to grow faster and India will grow 1.5 to 2 percent higher than China in next five years. India is going to contribute additional 6 percent to global GDP growth.”
In 2014 as per IMF data, India’s GDP was $2,050 billion or 2 trillion compared with China’s $10 plus trillion and the USA’s $17-18 trillion economy. “India will have third highest incremental GDP in 2014-2019 of $1,262 billion, which will be next only to China and the US,” Mr. Shanbhag said.
As per the Tata Securities study, “long-term investors in the India story have been actually rewarded with huge returns across cycles. Every $1,000 per month invested for 10 years starting January 2005 and ending December 2014 in the Sensex, has given a far superior return at 8.6 percent against 8 percent by Dow Jones Industrial Averages representative of US economy, 4.1 percent by Hong Kong’s Hang Seng index, a Chinese proxy, 3.7 percent by Japan’s Nikkei index and 2 percent by FTSE, a proxy for European economy.”
India’s industrial growth is recovering and it’s no more true that we are lan-guishing. Capital goods and consumer goods and the manufacturing sector as a whole is showing initial signs of recovery. Corporate growth will start show-ing from second half of the financial year i.e., November-December, but it will be reflected clearly from the fourth quarter, which would have much better growth, Mr. Shanbhag said.
Some key opportunities in the next trillion dollar GDP growth from the consumption point of view would be in housing, home durables, travel, leisure and enter-tainment.
From the infrastructure and capital expansion point of view, investment opportunities lies in mass trans-port, low cost healthcare, education and vocational training.
In the financial sector, investment opportunities lies in remittances and mobile payments as mobile pay-ment banks take off, which will impact current and saving account cash balances of banks as well as in credit scoring and risk assessment for retail loans.
There are some challenges ahead for the next trillion-dollar GDP growth. Like the interest rate, which may be cut for the next two quarters in 2015 and could go up in 2016. In addition, in the next five quarters, the Libor rate will rise quite sharply as the US Federal Reserve raises interest rates, Mr. Shanbhag said.
Another challenge will be the shrinking of govern-ment’s total expenditure as government withdraws interest and subsidies, which can be a challenge to economic activity, Mr. Shanbhag said.
(Source – Financial Chronicle, 23-July-2015)
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